What is Average Customer Lifetime Value?
Traditional business philosophy is that “it is often more expensive to acquire new customers than it is to generate repeat sales from existing ones and that existing sales are more profitable due to the reduced marketing expense.” This strategy is very effective for offsetting the affects of rising pay-per-click costs. While most businesses consider only the value generated from a customer’s first purchase, a business using an average customer lifetime value considers the value generated from all of a customer’s purchases. Customer lifetime value is the average time period a customer has a relationship with your business and the total revenue generated during that relationship. A relationship is defined as the time between the customer’s initial purchase and their final purchase from your business. For newer businesses, the “life-time” number is estimated based on loyalty expectations while older businesses with years of customer purchasing history can generate loyalty measures from th
